The week may be a contrarian week

This week may be a contrarian week. On Tuesday, CPI releases and is forecast at 1.2% m/m. Last month's print was 0.8% m/m. There are also Fed officials speaking - Brainard on Tuesday and Mester on Thursday. Given the higher expected inflation, the Fed speakers are likely to continue preparing the market for the tighter policy with hawkish comments. However, markets are forward-looking, and we think last week saw a fair amount of discounting.

Consider the US 10Y:

Source: www.tradingview.com

The yield has moved up quickly over a relatively short period, to the point that the RSI is overbought (blue rectangle). This extreme suggests that short sellers will look to book profit shortly and may use this week's calendar as a catalyst. I.e., the market may have already discounted this week's releases into price. If so, the scheduled announcements, whist introducing the prospect of volatility, may result in surprising price moves. We, of course, continue to monitor.

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Russell Shor

Senior Market Specialist

Russell Shor joined FXCM in October 2017 as a Senior Market Specialist. He is a certified FMVA® and has an Honours Degree in Economics from the University of South Africa. Russell is a full member of the Society of Technical Analysts in the United Kingdom. With over 20 years of financial markets experience, his analysis is of a high standard and quality.

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